Mandatory ESG Reporting and XBRL Taxonomies Combination: ESG Ratings and Income Statement, a Sustainable Value-Added Disclosure

Round 1

Reviewer 1 Report

Mandatory ESG Reporting and XBRL Taxonomies Combination. ESG Ratings and Income Statement, A Sustainable Value Added Disclosure.

The  paper addressed an important issue. But I am quite confused when I started reading the paper. In the abstract it says ESG is mandatory  for SMEs which is not right. In addition, there is no mention about the SME in the paper in other sections. There is no clear theoretical framework. In the paper the authors mentioned about various challenges in having  XBRL skills but such challenges  are not linked with any explanation. There is no specific empirical model used in the paper to explain the suitability of the mandatory ESG reporting with the XBRL taxonomy. The manuscript should be professionally proof read otherwise it is very hard to follow most of the arguments.

Author Response

First of all, we want to thank the reviewer for the insightful and essential comments that helped us improve our article. 

The paper addressed an important issue. But I am quite confused when I started reading the paper. In the abstract it says ESG is mandatory for SMEs which is not right.

We corrected the inaccurate information by adding the word "proposed" and referencing the recent (april 2021) EU provisional agreement on the European Climate Law

In addition, there is no mention about the SME in the paper in other sections.

The proposed model can be considered for any entity, regardless their size. The fact that SMEs are encouraged to prepare ESG disclosure is just supporting the main thesis.

There is no clear theoretical framework.

We enhanced the theoretical framework [95-137]

In the paper the authors mentioned about various challenges in having  XBRL skills but such challenges are not linked with any explanation.

The required XBRL skills are not the focus of this research, given that, once designed, the XBRL standard is usually automated by the AISs. This issue can be related to the implementation phase only.

There is no specific empirical model used in the paper to explain the suitability of the mandatory ESG reporting with the XBRL taxonomy.

We are preparing another (separate) research to test this model, through an application in three different industries, the results are confirming the feasibility and usefulness of this model. This paper is intended to be qualitative only, limited to the modelling of the XBRL standard guidelines.

The manuscript should be professionally proofread otherwise it is very hard to follow most of the arguments.

We had the paper proofread by an English native speaker and further revised by the AI software "Grammarly".

Thank you very much for your time, support and consideration.

Best regards

Author Response File: Author Response.pdf

Reviewer 2 Report

Please see attached report. 

Comments for author File: Comments.pdf

Author Response

We really thank the reviewer for the time, dedication and insightful comments provided. He/She really helped us improve the article.

1. Abstract. We restated the sentence related to the Income Statement to make it more clear. We extended one more paragraph at the end of the abstract to present the outcome of the research.
2. introduction. Added two important references related to a similar approach (last two paragraphs) 
3. Materials and methods. We added the sentence "This aim will be achieved by presenting a so‐called “ESG Scoring Value‐Added Income Statement & Weighted Average ESG % Score”. This standardised disclosure follows existing approaches that proved very efficient in measuring and assessing business performances [27] and credit risk [28]". Thank you for the very interesting and relevant speech suggested.
4. Results. The chapter title is now "Framework and Results" to better align its content. We modified the year 2017 (thank you for noticing this wrong information due to a typing mistake). We also included the recent EU contribution (previously only indirectly mentioned) related to the proposal for a Corporate Sustainability Reporting Directive (in the abstract). Renumbered the paragraph 3.4.3. Existing Literature properly referenced.
5. Conclusions. Added a new paragraph that includes a comparison with the existing literature (final one).

Thank you very much for your time and support.

Best regards

Author Response File: Author Response.pdf

Reviewer 3 Report

In the paper the authors design and recommend an additional Income Statement to embed structured Environmental, Social and Governance (ESG) disclosure, in order to standardize the information.

The paper is very interesting. My recommendations for improvement are as follows.

Introduction - at the end of the section must be added the sentence with the structure of the paper.
Literature review could be extended with other papers, below are some articles.

Efimova, O., Rozhnova, O., & Gorodetskaya, O. (2019, October). Xbrl as a tool for integrating financial and non-financial reporting. In The 2018 International Conference on Digital Science (pp. 135-147). Springer, Cham.

Seele, Peter (2016): Digitally Unified Reporting: How XBRL-based real-time transparency helps in combining integrated sustainability reporting and performance control. Journal of Cleaner Production. 136. 66-77 doi:10.1016/j.jclepro.2016.01.102

I would also like to see a well-developed discussion comparing and contrasting results presented in the paper with existing papers and then a contributions to literature.

Author Response

Thank you very much for your time and suggestions. We are glad you found this article interesting.

With regards to the comments and suggestions 

Introduction - at the end of the section must be added the sentence with the structure of the paper.

Added

Literature review could be extended with other papers, below are some articles.

Efimova, O., Rozhnova, O., & Gorodetskaya, O. (2019, October). Xbrl as a tool for integrating financial and non-financial reporting. In The 2018 International Conference on Digital Science (pp. 135-147). Springer, Cham.

Seele, Peter (2016): Digitally Unified Reporting: How XBRL-based real-time transparency helps in combining integrated sustainability reporting and performance control. Journal of Cleaner Production. 136. 66-77 doi:10.1016/j.jclepro.2016.01.102

ADDED. Thank you for this essential suggestion. Both these references are very relevant. 

I would also like to see a well-developed discussion comparing and contrasting results presented in the paper with existing papers and then a contributions to literature.

We added one more paragraph in the conclusions to meet this requirement.

Thank you very much for your time and support.

Best regards

Author Response File: Author Response.pdf

Round 2

Reviewer 1 Report

Thank you for the revision. I can see that authors removed the word mandatory and replaced with the word proposed. But the story is based on the concept of mandatory disclosure. In addition, the authors mentioned that the proposition is not focused on SMEs only. If that is true then that should be clearly mentioned throughout the study . in some places authors mentioned about SME without mentioning various challenges associated with various sized business. I am not able to agree  about the skill related point as for any business to implement XBRL there is a need of skill and definitely a cost factor. Moreover, there is mention about research philosophy but no clear theory that would support the research question.

Author Response

Thank you for the revision. I can see that authors removed the word mandatory and replaced with the word proposed.

We thank you for highlighting that evident misleading information and allowing us to correct it.

But the story is based on the concept of mandatory disclosure.

In addition, the authors mentioned that the proposition is not focused on SMEs only. If that is true then that should be clearly mentioned throughout the study.

We understood your perspective and concern. Indeed, several aspects had been taken for granted. After careful review and revision, we have taken steps to clarify every aspect, please refer to

• lines 21-23; 41-45; 51-53; 149-157; 375-377
• footnote no. 1;
• Figure 2 replaced, better describing the difference between large entities and SMEs, defining the converging path.

In some places authors mentioned about SME without mentioning various challenges associated with various sized business. I am not able to agree about the skill related point as for any business to implement XBRL there is a need of skill and definitely a cost factor.

We appropriately included the potential challenges that might arise by the eventual model implementation. This valuable suggestion actually led us to generate a further research idea, as we are now committed to using a customised Technology Acceptance Model (TAM) to test this model in a separate article.

Please refer to the lines 171-172; 427-443

Moreover, there is mention about research philosophy but no clear theory that would support the research question.

We further detailed for each Research Question the supporting theories (with new paragraphs in-between), please refer to the lines 100-134.

Added 10 more relevant references